AWB agreed to pay $39.5 million, including interest and the shareholders' legal costs, to more than 1000 aggrieved institutional and retail investors. The deal involved no admissions of liability by AWB.

Last week the company conceded in the Federal Court for the first time that it knew ''transport fees'' it made to a Jordanian company, Alia, were being passed on to Saddam Hussein's regime between 1999 and 2003. However, it denied the fees contravened United Nations sanctions or abused the UN's oil-for-food program.

It also denied two central allegations made by shareholders: that it broke the continuous disclosure law, and that it misled the stockmarket.

AWB's chairman, Peter Polson, described the sum as ''commercially acceptable''.

The court heard last week that on one measure of alleged loss, the claim would be more than $100 million before interest or legal costs.

AWB's expert witness had assessed the compensable damages at less than $10 million.

AWB appears to have no insurance cover for the case, saying it would book $39.5 million as a significant item in its next accounts.

The litigation funding firm IMF, which backed the shareholders, said it expected to generate a pre-tax profit of $6 million to $7 million.

The shareholders' solicitor, Ben Slade, said his clients had faced uncertainty about how Justice Lindsay Foster would assess damages in the case.

''The market delay in adjusting to the revelations of the Cole royal commission added a level of complexity and uncertainty to the assessment of damages,'' said Mr Slade, a principal of the law firm Maurice Blackburn.

An expert witness retained by the shareholders had estimated that the market absorbed the revelations about AWB's Iraqi dealings over four months. This spanned the publication of Paul Volcker's report for the UN in October 2005 to the early weeks of the Australian commission of inquiry headed by Terence Cole, QC, in January and February 2006.

AWB's expert said there were only two trading days when disclosures about Iraq had a material impact on the AWB share price. The difference between the two experts translated into a share price impact of $2.15 a share versus 19c.

If the case had proceeded, Justice Foster's judgment would have been the first ruling on a shareholder class action in Australia.